25 Years of Acquisitions in the Passive Components Industry
07.31.2014 // Dennis M. Zogbi // Passives
Acquisitions have shaped the global passive electronic component industry over the past 25 years. In fact, based on Paumanok Publications, Inc. estimates, approximately $6,105 million U.S. dollars in cumulative capacitor related asset value has changed hands during that time period (including components and raw materials See Figure 1), and approximately $2,250 million U.S. dollars in cumulative linear and non-linear resistor assets have also changed hands during the same time period (See Figure 2).
Source: Compiled From the Paumanok Archives Transaction value and revenues will differ. Revenues and Asset value of peripheral components other than CAPACITORS have been excluded from valuations.
Are there Patterns in the Timing of Acquisitions?
A close look at the myriad of transactions that have taken place in the passive component market over the past 25 years reveals some interesting patterns.
2) Companies are more likely to want to buy target acquisitions during times of great cash infusion into the market to reduce taxable income, but the target companies are less likely to sell at such times because they are too distracted keeping up with orders rather than looking for a formulated and immediate exit strategy. Subsequently, the famines which usually follow feasts in the global passive component industry occur at the time when targeted vendors wish to exit and when acquirers actually commit to transactions. The reader will note the increase in M&A activity in both capacitors (Figure 1) and resistors (Figure 2) between 2000 and 2003 that supports this theory.
3) Regardless, transactions are continual, and it can be argued that since 1998 those assets have been changing hands on a frequent and continual basis in both the capacitor and resistor industries.
4) Acquisitions can be influenced by outside forces threatening the market, especially those involving disruptive technologies.
Source: Compiled From the Paumanok Archives Includes LINEAR AND NON-LINEAR RESISTORS. Transaction value and revenues will differ. Revenues and Asset value of peripheral components other than RESISTORS have been excluded from valuations.
Acquisitions in Capacitors:
The following section of this article describes the global acquisitions in the capacitor industry as noted in Figure 1 and also the related raw materials being acquired.
The Tantalum Supply Chain:
Our research for this MarketEYE article has revealed that the majority of transactions impacting the capacitor industry have been related to tantalum between 1990 and 2014. Tantalum has been the focal point of many transactions related to electronic components and raw materials (45% of all capacitor and material related transactions between 1990 and 2014 were related to the tantalum supply chain according to our estimates).
The Ceramic Supply Chain:
Acquisitions impacting the ceramic capacitor supply chain accounted for an estimated 31% of all capacitor and related material acquisitions between 1990 and 2014 as follows-
Plastic Film Supply Chain:
Acquisitions involving the plastic film capacitor supply chain accounted for about 19% of cumulative capacitor asset value in transactions between 1990 and 2014.
Aluminum Electrolytic Supply Chain:
Acquisitions in the aluminum electrolytic capacitor supply chain are few and far between, representing only 5% of all transactions in the capacitor segment between 1990 and 2014 (one major vendor noted that few transactions in aluminum capacitors actually take place because seldom does anything come up for sale).
Acquisitions in Resistors:
The following describes the acquisitions in the global resistor industry between 1990 and 2014. The reader will note that transactions in resistors are fewer than that in the capacitor space. This is because the relative markets for resistors are much smaller than capacitors on a global basis.
The cumulative resistor asset value that has changed hands over the past 25 years is valued by Paumanok Publications, Inc. at $2,250 million USD, compared to capacitors, which is estimated at $6,105 million USD during the same time period. The reader will also immediately note in Figure 2, that transactions in the resistor market over the past 25 years have been dominated by Vishay, who has made a series of acquisitions to bolster its position in specialty resistor markets worldwide.
Acquisitions In Specialty Fixed Resistors
Specialty fixed resistors include the Wirewound and Nichrome film resistors as well as the SIP and DIP Networks, bulk metal foil and the tin-oxide flameproof resistive products.
Acquisitions in Chip Resistors:
In thick film chip resistors, the major acquisitions over the past 25 years are as follows
Acquisitions in Non-Linear Resistors
Acquisitions in non-linear resistors also played an important role in shaping the modern resistor landscape.
Acquisitions in Thin Film resistors
Thin film resistor technology has also played an important role in Vishay’s overall passive component strategy.
What Motivates Companies to Buy?
Based on a detailed analysis of each of the acquisitions made in the capacitor and resistor segments over the past 25 years, we have come to the conclusion that the majority of acquisitions (67%) were made because they were an integral part of a grand strategy of the acquirer. The grand strategy included the extension of a product portfolio to be a “one-stop shop” and to appear attractive to distributors; or it involved the dominance of a specific segment of the market, with emphasis upon the value-added and application specific component segment. About 21% of acquisitions, based on the value of assets transferred, were based on the need for the acquirer to gain specific technology that they did not have and could not emulate. This need for technology typically involved high capacitance ceramics, high CV/g tantalum powders, conductive polymer technology, and thin film resistors. The final 12% of acquisitions we consider to be “Opportunity” based, whereby a vendor wanted to exit the market, and an acquirer saw the opportunity to expand and acted on it.
Source: Paumanok Estimates- All Rights Reserved.
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